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Rhode Island workers, retirees mull pension deal

By DAVID KLEPPER Associated Press

Posted:
03/30/2014 10:41:21 AM CDT

Updated:
03/30/2014 10:48:17 AM CDT

PROVIDENCE, R.I.—The fate of Rhode Island's landmark pension overhaul—a model cited in other states wrestling with escalating retirements—now hinges on the votes of the same government workers and retirees who sued to block the law.

Thousands of teachers, firefighters, police and other state and municipal workers and retirees are voting on a proposed settlement in the legal challenge to the 2011 pension law, which raised retirement ages and suspended pension increases.

The proposed settlement offers retirees a modest pension increase—$500—with the promise of additional increases sooner than the current law. But it retains most of the sweeping changes approved by lawmakers—and the billions of dollars the law is expected to save the state and its municipalities in coming decades.

The settlement must be approved by public workers, retirees and state lawmakers. If the proposal is rejected at any stage, the lawsuit would continue.

Public workers and retirees interviewed by The Associated Press expressed a range of opinions—from resigned support to dissatisfaction with their own union leaders.

"I think they caved on a lot of things," said Matt DiMaio III, 57, of North Providence, who retired last year after spending 30 years in the state's insurance regulation office. "I worked for less money (in a state job) for years because it was going to be made up at the end. I think we need to take the chance in court."

But the risk of losing an expensive legal fight—and getting nothing—has other workers endorsing the settlement.

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University of Rhode Island employee Mike McDonald, who is vice president of his local union, said the deal would bring closure to years of bruising political and legal wrangling between public workers and retirees and state leaders.

"It's never going to be as good as it was, but it's better than what we have now," the 54-year-old McDonald said. "It's 'take what you can get.' I'd like to put this to bed. Get it over with."

Rhode Island had one of the most troubled pension systems in the nation before lawmakers passed the overhaul in a special legislative session. The Rhode Island Retirement Security Act was designed to save an estimated $4 billion for the economically troubled state over the next 20 years.

Many of the 66,000 state workers, teachers and municipal workers and retirees covered by the state retirement system complained that the changes amounted to broken promises and an unconstitutional change to their benefits. The legal challenge to the law was the subject of closed-door settlement negotiations for more than a year, while the law was heralded—and derided—across the country as other states looked to address their own pension problems.

Under the law, cost-of-living pension increases were suspended for five years, with regular increases expected to return when the pension fund grew to healthier levels. The settlement would give retirees a $500 increase, with increases of up to 3.5 percent every four years beginning in 2017.

Also, as part of the deal, employees with 20 years of service could keep their existing pension plan instead of receiving a hybrid plan that combines a pension with a 401(k)-type account. All other workers would receive the hybrid plan, though governments would contribute slightly more to workers with more years of service. Employees would also pay slightly more toward their own retirement than under current law.

While workers and retirees won some concessions, the settlement preserves an estimated 95 percent of the savings from the 2011 law.

Approving the settlement is complicated. A first round of voting—underway now—involves thousands of ballots sent to members of the unions and retiree coalitions that challenged the law. Those ballots must be returned no later than April 3 to be counted. If fewer than 50 percent of the ballots come back as "no" votes, then the process moves to a second round of voting.

Under the process, anyone who fails to return their ballot is counted as a "yes" vote. That's irked opponents of the settlement, who say elderly retirees, former workers who have left Rhode Island or those who aren't following the debate may be less likely to mail the ballot back.

"The deal is not great, but what I'm most opposed to is how the vote is being handled," said Paul Guglielmino, 52, an engineer in the state's Department of Environmental Management. "It's a democracy, and if this was a regular vote, then I'd live with the result. Maybe this is the best deal the union could get. But I don't understand why the union agreed to this voting process."

Lawyers who worked on the settlement say class-action lawsuits commonly use ballots that count as a "yes" vote if not returned.

Retirees and public workers are weighing their options and calculating what the settlement would mean to their retirement security.

"I'm definitely a 'no' vote," said Robert Jackson, a 66-year-old who taught math in Pawtucket schools. "After 38 years of teaching—bingo!—they pull it right out from under me. A check for $500? They're doing this on the backs of the retirees."

But Jim Gillis, a 71-year-old retired social worker, said he's willing to get less than what he was originally promised in exchange for the concessions in the settlement.

"If you take your chances in court, it's a gamble," he said. "And I'm not a big gambler."